Microsoft’s New Zune Goes After iPod Touch; How It Stacks Up

Confirming weeks of speculation, Microsoft (NSDQ: MSFT) announced Tuesday that a new Zune, with a touch screen, high-definition video, and an internet browser, is coming to market in the fall. The company isn’t pulling any punches about the device it’s trying to position the new “Zune HD” against: the iPod Touch. “This device is created to go head to head with the iPod Touch,” Chris Stephenson, general manager of global marketing for Microsoft Zune, tells CNET in an interview. To distinguish the two devices, Stephenson said Microsoft would emphasize the new Zune’s HD radio feature, which will let users listen to radio in higher quality than via traditional radio services. The iPod Touch does not come with a built-in radio.

Microsoft also said that the Zune service would soon be coming to Xbox Live. It appears that for now only the Zune’s catalog of videos and TV shows — which will replace the current Xbox video marketplace — is coming to the gaming console. Microsoft says the arrangement will bring the “Zune brand experience to millions of new consumers for the first time.” In the past, the company had hinted that Zune services were coming not only to the Xbox but to mobile phones as well. However, Stephenson tells CNET that it will be at least a year before the Zune service comes to the phone. Microsoft is expected to announce more of its plans for the Zune at the E3 gaming conference next week.

It’s no secret, of course, that the Zune hasn’t exactly been a consumer hit for Microsoft. The company has persevered, emphasizing Zune-related services, like its music store and ZunePass subscription service, while also promising that a new device was in the works. With this third version of the Zune device, though, Microsoft will not only face stiff competition from the iPod but also from smartphones like the iPhone, which people are increasingly using to access their music collections.